Elmhurst Memorial gets more patients after Edward merger

In the first six months after it merged with Edward Hospital, Elmhurst Memorial Hospital got an influx of patients due in part to its new partner's close relationship with the western suburbs' largest independent physicians group.

Through the half-year period ended Dec. 31, Elmhurst registered a 7.7 percent increase in inpatient discharges, to 6,767 from 6,426, including a 34.5 percent jump, to 779 from 579, in newborn discharges, according to a recent financial statement to bondholders.

Other measures of demand also ticked up, including inpatient occupancy, which rose to 59.7 percent from 54.3 percent, and hospital outpatient surgeries, which surged 12.6 percent in the period to 3,268, from 2,903.

Prior to the close of the union with Edward on July 1, Elmhurst had struggled to fill its new 259-bed hospital building, which opened in 2011 and cost $450 million. Elmhurst's heavy debt burden and poor financial performance prompted it to seek out a savior.

After the merger closed, debt-rating agencies predicted Naperville-based Edward's longtime affiliation with DuPage Medical Group — a powerhouse multispecialty practice based in Downers Grove with more than 425 doctors — would yield more patient referrals for Elmhurst.

The prediction appears to have borne out.

DuPage Medical “continues to add new physicians through acquisition and organic growth and strives to serve patients where they are,” DuPage CEO Michael Kasper said in a statement. “In this case, our patients are choosing Elmhurst Hospital. It is a state-of-the-art facility with the latest technology, conveniently located for our patients.”

The improved utilization led to higher revenue for Elmhurst, which posted $207.5 million for the six-month period, up 8.9 percent from $190.5 million in the prior year. The gain helped the hospital narrow its operating loss for the period to $14.3 million from $22.1 million in 2012, according to the unaudited financial statements. Elmhurst posted $394.5 million in revenue in fiscal 2012.

It's unclear how long Elmhurst will be able to grow, given that demand for inpatient services is falling in DuPage County and elsewhere as more care shifts to outpatient settings. Total patient days at eight DuPage hospitals fell 4 percent, to 455,236, in 2012, from 465,933 in 2010, according to a Crain's analysis of data from the Illinois Department of Public Health.

Still, Elmhurst's improved performance is notable.

“Those are significant increases in a declining market, even for a facility that's brand-new,” said Elyse Forkosh Cutler, president of Chicago-based Sage Health Strategy.

CLOSE TIES

DuPage Medical's physicians are among the doctors on Edward's 1,000-plus-member medical staff, and the organizations collaborate to provide care to about 100,000 health maintenance organization patients through Illinois Health Partners. The hospital and physicians group also are cooperating on an accountable care organization through the Medicare shared-savings program.

“Our volumes have increased significantly and we are well ahead of budget and ahead of last year's financials," he said in a statement. "Our merger . . . is going very well. Together we are improving quality, efficiency and access to care.”

Inpatient admissions at Edward for the six months ended Dec. 31 were roughly flat between its main hospital and Linden Oaks, its behavioral health hospital. But outpatient visits and surgeries increased. And financial results were significantly better: It posted $331.3 million in total revenue for the period, a nearly 10 percent increase. Operating income rose to $12.3 million from $9.7 million, a 27 percent increase, according to financial statements.

In an August ratings report, Moody's Investors Service revised Edward's outlook to negative from positive, citing Elmhurst's operating losses and long-term debt, which stood at $479 million on Dec. 31.

Still, the agency noted that one of the system's strengths was that its “strong and stable” affiliation with DuPage Medical Group would be key to improving volumes at Elmhurst and turning around operations.

In an October report, Fitch Ratings said “one of the largest opportunities with the merger is Edward's affiliation” with DuPage Medical.

With $415 million in net revenue in 2012, the practice ranked fourth on Crain's 2013 list of the largest physicians groups in the Chicago area.